Page 14 - To Register or Not to Register: A Definitive Guide to Understanding the Broker Registration Requirement

IN-DEPTH LOOK: RECENT ENFORCEMENT ACTIONS
Unregistered Online Platform
The SEC has pursued several actions against online private security “exchanges.” In October 2015, the SEC instituted administrative and cease-and-desist proceedings pursuant to Section 15(a)(1) against an online securities services provider, Steven Muehler and his companies, called Blue Coast Securities and Alternative Securities Markets Group Corp. (“ASMG”). The order points out that although they were not “associated with a registered broker-dealer . . . they have o ered and agreed to e ect securities transactions for customers over the Internet” and they “held themselves out as broker-dealers that provide broker-dealer services and other ‘issuer services.’”
Although the order also mentioned the illicit transaction-based compensation for these services, the order separately calls out that the respondents conducted certain activities without appropriate registration as broker-dealers. In this case, the site also made several false representations to prospective securities issuers and investors regarding its capabilities.
On June 21, 2016, the SEC accepted a settlement o er from the respondents in that case. The related order specified the respondents must pay more than $250,000 in disgorgement and prejudgment interest and $160,000 as a civil penalty in addition to being e ectively barred from the securities industry. The order holds Muehler and ASMG in breach of Section 15(a)(1). They also breached Section 10(b), Rule 10(b)-5, which makes it unlawful to employ manipulative and deceptive devices in connection with the purchase or sale of securities.
*For more information about the cases in this section, please reference our whitepaper, “The Broker Registration Requirement and its Enforcement.”
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